Non-Performing Loans Ireland By Pat Davitt FIPAV REV MMCEPI IPAV, CEO

Irish Mortgage Market Year BN Volume 2015 4.9 27,324 2015 4.9 27,324 2016 5.7 16% 29,498 7% 2017 7.3 28% 34,793 18% Source: Life Insurance Association Ireland (LIA) Presentation

Housing Market 2017 2,022,895 RESIDENTIAL PROPERTIES IN IRELAND 55,000 RESIDENTIAL PROPERTY TRANSACTIONS 32% BUYING PROPERTY WITHOUT MORTGAGES (exclude funds) 2.75% HOUSING STOCK (TRADING YEARLY) AVERAGE HOME SOLD ONCE EVERY 36 YEARS

IPAV Property Price Barometer Jan-Dec 2018 National Average of 3 property types €265,015 https://www.ipav.ie/news_publications/ipav-property-price-barometer-jan-june-2018

Non-Performing Loans (NPL) 2017 2018 KBC 35% 25% Ptsb 26% 16% Ulster Bank 12% AIB 9% Bank of Ireland 8% 4% EU (Average) Source: Life Insurance Association Ireland (LIA) Presentation

Mortgage Arrears: Q2 2018 - PDH Number Balance €BN Arrears € BN 725,695 98,226,060 >90 days 46,003 - 6.3% 9,508,257 – 9.7% 2,689,554 >720 days The majority in default is 5 yrs + 28,237 - 3.9% 6,565,023 - 6.7% 2,466,877 Source: Life Insurance Association Ireland (LIA) Presentation

Private Properties Repossessed: 2010 – 2017 Source: Life Insurance Association Ireland (LIA) Presentation

High Court Repossessions: January – July 2018 = 290 Bank Number Ptsb 102 Bank of Ireland 73 AIB 47 KBC 45 Ulster Bank 23 Source: Life Insurance Association Ireland (LIA) Presentation

Mortgage Arrears: Q2 2018 - Buy To Let Number Balance €BN Arrears €BN 118,234 20,860,230 >90 days 17,394 – 14.7% 4,689,151 – 22.5% 2,070,991 >720 days 12,752 - 10.8% 3,648,673 - 17.6% 1,878,963 Source: Life Insurance Association Ireland (LIA) Presentation

Buy To Let Properties Repossessed: 2010 - 2017 2,977 32% voluntary surrender Source: Life Insurance Association Ireland (LIA) Presentation

Alternative Options Icare Home for Life €100m fund – AIB MTR (Mortgage to Rent) €100m to purchase housing, then sell off housing to affordable housing body. Affordable housing, rents back to original owner at an affordable rent (a rent calculated in accordance to what the occupier can pay) Home for Life €100m fund - ptsb MTR (Mortgage to Rent) as per AIB above

Alternative Options PTSB Vulture Funds – PDH & BTL BTL /Voluntary Surrender/Residual debt written off Lender Ptsb from 1st Jan 2018 offered clients a pilot scheme to voluntary surrender their house and Ptsb would eventually sell house and write off remaining debt. Taken up by 99% of clients. Get out of jail option Vulture Funds – PDH & BTL Voluntary surrender /refinance less than balance/residual debt written off. They are buying these loans with large haircuts and will deal with the borrower, if they make an offer to them. They are not in it for the long term just the gain

Conduct on Mortgage Arrears Code of Conduct of Mortgage Arrears (CCMA) that all banks, lenders and companies must adhere to. 5 principals of code 1. Communication with the borrower 2. Financial information from the borrower 3. Assessment of the case 4. Resolution proposed 5. Appeal if necessary Borrowers must complete a standard financial statement to include: - 3 months bank statements - 2 months payslips - Evidence of any savings Bank carries out a credit report on receipt of the above

Repossession Process Where a resolution cannot be reached the bank can seek to repossess - which does not always yield the desired result for the banks Typically a borrower needs to be 12 months in arrears Bank will issue a final demand letter for the payment of the loan If payment not made the bank’s solicitors will file for a court date – which is typically 3 – 6 months after the final demand is issued Typically the case is adjourned for a further 6 months Typically the second court is adjourned for further 6 months

Repossession Process Could be 4 court dates before a judge will give an order for repossession – with a normal stay of 6 – 9 months before the order is executed This process is assuming the bank’s paperwork is in order , which is not always the case It takes 3 – 5 years to get a repossession order and the banks wont always get their fees Many clients have mortgages for 8 -9 years in arrears and still living in their family home

Valuation Process The bank or receiver instructs a Valuer who must use Blue or Red Book Standard by Irish Law Valuers are asked to value on Market Value Discussion Market Value not the same as Forced Sale Value When repossession happens the house is normally gutted, contents moveable and unmoveable gone - what value have we then ? Valuers under threat, physically and mentally from some owners Banks want to pay low sales fees, typical valuation fee €150 Inc. VAT

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